Cycles: The Science of Prediction

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Cycles: The Science of Prediction

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Cycles: The Science of Prediction

Cycles: The Science of Prediction

In 1947 Edward R. Dewey and Edwin F. Dakin published their book Cycles: The Science of Prediction which argued the United States economy was driven by four cycles of different length. Dewey devoted his life to the study of cycles, claiming that “everything that has been studied has been found to have cycles present.” He carried out extensive studies of cyclicity in economic, geological, biological, sociology, physical sciences and other disciplines. As a result of his research, Dewey asserted th

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Thinking: The New Science of Decision-Making, Problem-Solving, and Prediction (Best of Edge Series)

Thinking: The New Science of Decision-Making, Problem-Solving, and Prediction (Best of Edge Series)

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Unlock your mindFrom the bestselling authors of Thinking, Fast and Slow; The Black Swan; and Stumbling on Happiness comes a cutting-edge exploration of the mysteries of rational thought, decision-making, intuition, morality, willpower, problem-solving, prediction, forecasting, unconscious behavior, and beyond. Edited by John Brockman, publisher of Edge.org (“The world’s smartest website”—The Guardian), Thinking presents original ideas by today’s leading psychologists, neuroscientists, and phil

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6 Comments

Benjamin Espen

June 4, 2016 at 4:14 pm
33 of 35 people found the following review helpful
5.0 out of 5 stars
Short and insightful, July 8, 2009
By 
Benjamin Espen (Flagstaff, AZ United States) –
(REAL NAME)
  

Cycles is a book from the youth of modern statistics. The field was young, and progress was rapid. You can taste the optimism. The regular abuse of statistics was still in the future, and calculations were simple because you had to do them by hand. Wonderful new applications were just lying about, awaiting an intrepid analyst to make use of them. So, someone applied statistics in a new way to the world of economics. Dewey and Dakin wished to be able to more accurately predict the growth of whole nations, and the businesses within them. The authors were attempting to add rigor to the field of political economics, regarding it as hitherto little better than a voodoo science.

The debt of the authors to those whose names, equations, and graphs line the pages of this book — and to many others unnamed — is without end. Theirs is the pioneering work that is moving economics out of the blind alley where it stood for many years, so that it can take its rank as a true science. Cycles p. xii

Cycles is primarily about sigmoidal growth curves and the application of Fourier analysis to time-series data, with examples chosen primarily from economics. That is a pretty terse characterization, so let me unpack it.

Sigmoidal or logistic growth curves were first suggested by Pierre Verhulst in 1838 to describe the growth of any population of living organisms. The sigmoidal function has a characteristic ‘s’ shape that describes how a population starts off slowly, then grows quickly, then slows its rate of growth until it reaches the maximum carrying capacity of its environment.

From animal populations, it was a short leap to applying the logistic curve to human populations. There are some very interesting graphs in the book. One I especially liked was the sigmoidal fit to the population of the United States, with a predicted equilibrium population of 200 million or so. [p. 15] Dewey and Dakin wanted to extend the ecological discovery of the logistic curve into the world of business. Using sales or production data, Dewey and Dakin tried to systematize the business cycle by analogizing a business to an organism. The sales or production data were plotted as time-series, and then a logistic curve was fit to the data. This works extremely well, and a plethora of examples are given in the book. One of the more interesting graphs is created by plotting a generic logistic curve, and then placing an industry on the curve in the place where the slopes [rate of growth] match, thus creating a simple visual representation of the ‘age’ of an industry. This actually works pretty well, with television far down at the ‘young’ end of the spectrum, oil in the middle, and horse buggies at the ‘old’ end. [p. 49]

Looking at the rate of growth, rather than absolute growth, is key to Dewey and Dakin’s method. By doing so, one can more clearly see changes in the curve than with absolute numbers, especially if the scale gets very large. This is easily done by means of a semi-log or ratio plot. When one does so, it becomes clear that the rate of growth is continually decreasing until it approaches zero.

Time-series data are any kind of data plotted against time. This could be the aforementioned population growth curve, or stock prices, or even the tides. Most anything can be turned into a time-series simply by graphing the data in the order they were collected.

Fourier analysis is the the really fun one of the lot. Joseph Fourier discovered that most any repeating pattern could be created by the addition of a number of sine and cosine functions using the superposition principle. This can be used on phenomena like sound waves to break them down into a collection of pure tones. One can then recreate the original sound by combining the pure tones. This techinique is very useful for waves of all types, but it turns out to have more general applications.

Next come the eponymous cycles. A great deal of the book is devoted to analyzing cycles that can be observed in nature and business, with periods of 54, 18, 9, and 3.5 years. Various phenomena are related to these cycles. For example, the 18 year cycle is identified as the real estate cycle in the United States. Common stocks are said to rise and fall with a rhythm of 9 years, while industrial production moves in 3.5 year waves. The data presented here is certainly intriguing, but I remain skeptical. It would be an interesting exercise to see whether the cycles have continued for the last 60 years since the book was updated.

At least part of the reason I am skeptical about the cycles is the use of moving averages, which are one of a class of statistical tools known as ‘smoothers’. Smoothers are very dangerous statistically, because their use before analysis can result in inflated R^2 and p-values. Smoothers work well for visualization however, and that is their primary use in Cycles. Dewey and Dakin did not…

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Elliot Malach

June 4, 2016 at 5:13 pm
24 of 25 people found the following review helpful
5.0 out of 5 stars
Harmonics of Economic Cycles, August 15, 2010
By 
Elliot Malach (South Beach) –
(VINE VOICE)
  
(REAL NAME)
  

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This book was written in the 1940s, out of a study commissioned by Herbert Hoover, designed to find out the cause of the Great Depression. I actually found this book after it was quoted in other publications. The information Dewey and Dakin discovered is timeless and incredibly interesting. Some of the correlations will blow you away.

The bottom line is that there are definite cycles of varying lengths, which affect all business, growth, the stock market, weather, etc. This should come as no surprise, since our solar system and the universe are built upon harmonics, which are nothing more than overlapping wave cycles. They were not looking for the “why” booms and busts occurred; their focus was on the “when.”

What is interesting is that I extrapolated their cycles to the present time period, and our current recession/depression fits in perfectly with the cycle lows of the 54 year, 9 year and 18.3 year cycles. According to their work, the bottom for the real estate cycle would have hit around September 2007. That got my attention.

Even though the book is mathematically oriented, it is very easy to understand for someone without a background in economics or math. The fact that this book was published in 1947 is actually a positive, because we can now look back and see how valid their information really is!

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Leon P. Hanekom

June 4, 2016 at 5:24 pm
10 of 11 people found the following review helpful
4.0 out of 5 stars
Cycles: The Science of Prediction Review, August 2, 2009
By 
Leon P. Hanekom
(REAL NAME)
  

This book presents a very good idea of how Cycles affects human actions and are strongly recommended for all Stock Brokers, Business People and People affected by behaviour of the Statistical Mean of Civilization. The contents of the book is presented in an excellent way to convey the message to the reader and make him/her fully understand how cyclical all human actions are. It is strongly recommended for any reader from leasure readers to professionals in the relevant industries and is a permanent addition to my bookshelf collection.
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Irfan A. Alvi

June 4, 2016 at 6:07 pm
68 of 71 people found the following review helpful
3.0 out of 5 stars
Disappointing, December 3, 2013
By 
Irfan A. Alvi (Towson, MD USA) –
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This review is from: Thinking: The New Science of Decision-Making, Problem-Solving, and Prediction (Best of Edge Series) (Paperback)
I like the series of books associated with Edge.org, and this particular book has several prominent contributors, but I was disappointed. The problems are twofold. First, some of the contributions are simply too rambling and uninteresting, and to make matters worse, too long as well. Second, other contributions, especially those from the more prominent contributors, are more worthwhile, but even these tend not to have the same density and conciseness of content as can be found in other writings by the same authors, so the contributions are considerably ‘lower yield’ than I expected. Overall, I think this book is a good concept which wasn’t well executed, so I unfortunately can’t recommend it.
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Lawrence Way

June 4, 2016 at 6:50 pm
47 of 49 people found the following review helpful
3.0 out of 5 stars
Informed but…., November 26, 2013
By 
Lawrence Way (San Francisco, CA USA) –
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This review is from: Thinking: The New Science of Decision-Making, Problem-Solving, and Prediction (Best of Edge Series) (Paperback)
This book contains much interesting, up-to-date information, but it largely consists of unedited transcripts of informal discussions or presentations. As such it displays stream of consciousness rambling, unnecessary and irritating repetition, lack of depth in the development of many of the ideas, and a host of irritatingly poor grammar. I understand that Professor Brockman may have wanted a fast turn-around, but that surely could have been accomplished with a modicum of “condensation and editing for clarity.”
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Let’s Compare Options Preptorial

June 4, 2016 at 7:21 pm
57 of 64 people found the following review helpful
5.0 out of 5 stars
If You LIked Fast and Slow or Edge, You’ll Love this one!, October 29, 2013
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This review is from: Thinking: The New Science of Decision-Making, Problem-Solving, and Prediction (Best of Edge Series) (Paperback)

This is a surprising book! After being a fan of John and Edge dot org for years, as well as thoroughly enjoying Fast and Slow (Thinking, Fast and Slow), I expected great things from this, especially given the “Edge” contributors, and was not disappointed. However, the range of topics is so much greater than neuro/computing, and some of the more technical topics on Edge, that I was pleasantly surprised.

Instead of only looking at the usual “cutting edge” theories of Bayes, Markov, utility functions vs. probabilities, etc. the authors actually challenge nearly all of the “status quo” ideas from stats and emotion to neuro. Frankly, I sometimes get a bit tired of the “brain as computer” as well as “brain not as computer” tug of war, and this refreshing collection is so creative, innovative and pro/con that it leaves many of the “popular neuro” books in the dust. The selection of contributors is breathtaking, not just from credentials, but the pace and quality of the writing and range of topics, keeping us turning the page without writing down to us.

If you check out the contents you’ll find a wide range of topics, from developmental to neuro, decision theory, linguistics, problem solving, and much more. Hannah Arendt wrote Thinking, Willing and part of Judging, and I think she would have been impressed with this collection (which also adds Feeling and Acting/Deciding) even from a more philosophical frame. The pace is lively and John/ Daniel’s editing is consistenly well done, so the quality and “page turner” nature doesn’t vary by author. Some are more technical than others, but you can tell the marching orders were to make it fun and enlightening, whether you were talking addiction or econometrics! Although cognitive science and decision theory has been overrun by stats lately, although they are covered thoroughly, they aren’t center stage or overstated to show off the contributors’ math skills.

Daniel does expand some of his fast and slow (as well as “pick a gist”) ideas here, especially in two of his favorite areas (intuition and the unconscious), but the range is so broad that there is a ton of new material to consider beyond fast/slow, as well as the other contributors. This will genuinely make your next plane ride go: “What, we’re landing?” This doesn’t take a “self help” tone any more than fast/slow did, but can truly be life changing in many of its deep and surprising connections between less rational choices and our hormones, wiring, architecture, decision processes, problem solving strategies, and even parsing/ semiotics/ ethics.

If you enjoy Kurzweil, Pinker, Eliasmith, Dennett, etc. you will really like this new gem, which covers an amazing range of thinking facets, highways and even backroads, and explores more than one side of the issues. Current tug of ware areas like molecular Darwinism and body/mind chicken vs. egg controversies are handled pleasantly gray and pro/con, not black/white. There is a LOT to digest, and the publisher/Amazon is offering it at a price sympathetic to our budgets.

Honestly, the how to build a brain, make a mind, etc. comparables are well written, albeit not nearly as broad or current, and this relatively long text stands equal or better than the best out there, yet doesn’t try to capitalize on the success of fast and slow or similar titles by inflating the price into the Springer league! I’ve read nearly 7 books recently in this general category that are selling in the $40+ range without this book’s breadth or depth, let alone currency, research foundations or readability. (Cf: Build a Brain, though brilliant, is $88!). Kurzweil is more reasonable. Highly Recommended at any price, a must at 400+ astonishing and revelatory pages for under $12 US.

Emailer question: “Is this a lot of psych? Why is it NOT self help?” A. Good and subtle question. If you compare it with books like the many titled “Blind Spot” that show cognitive biases, demographic/psychographic biases, philosophical quandaries of nature/nurture or “business and leadership” type titles, it is head and shoulders above them neurologically, computationally, psychologically and philosophically. An intelligent reader can look up a dozen links on Wiki on cognitive biases and get the “gist” without investing a dime in any book. This is not some tome on how to avoid mistakes if you are basically an idiot, and the contributors are leading edge in each of their fields.

There are many elements that are fun, funny and “homey” but there are graduate probability level discussions too. In brief, it is very well balanced technically, but humanistic and “spiritual” enough (despite sometimes controversial “materialistic” contributors who ironically also believe in free will ala Nietszche– no one…

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